Capital Employed

Capital Employed is the amount invested in the business on any particular day

sunil

Capital employed is usually represented as total assets, assets less current liabilities, or non current assets plus working capital:

Capital Employed = Total Assets − Current Liabilities

Capital Employed is equal to Non-Current Debt and Equity provide obvious sources of long-term funding, but a further source is provided by the short-term debt that remains on the balance sheet at the year end. The sum of these sources of long-term funds is termed capital employed.

Definition

Capital employed can be defined as equity plus loans which are subject to interest or one can say that it is total assets less non bearing interest liabilities.

Capital employed can be defined as shareholders funds (ie. Share capital and reserves) plus creditors > 1 year (long-term liabilities) plus provisions for liabilities and charges. NB. This MUST equal Total assets less current liabilities.

Capital employed is the value of the assets that contribute to a company's ability to generate revenues, ie. their liquidity.

CAPITAL EMPLOYED =                                                 EQUITY SHARE CAPITAL

                                                                                     + PREFERENCE SHARE CAPITAL

                                                                                     + RESERVES AND SURPLUS

                                                                                     + LONG TERM DEBTS 

                                                                                      - MISCELLANEOUS EXPENSES

                                                                                       - P & L (Dr)

                                                                                       -NON TRADE INVESTMENTS

                                                          OR

CAPITAL EMPLOYED       = DEBT + EQUITY

CAPITAL EMPLOYED SHOWS THE AMOUNT OF FUNDS INVESTED IN THE BUSINESS.